Tuesday, October 26, 2010

Forex Trading Indicators

When used correctly, forex trading indicators will help you gain great profits and highly increase your chance of profiting in the market. So how do you find and use these indicators and use them wisely?
First you will need to know that there is no one indicator that can perform perfectly and shows a clear signal of a buying or selling signal. Every forex trading indicator generators either buying or selling or both signals. There are also a signal generate by these indicator and that is the noise signal. This is the signal that you do not want to follow as they are "fake" signals. However you will not know that they are fake signals unless you combine one or more indicators to work together in a chart. The indicators signals cancel of each other noises and produce a clearer buy and sell signals. You can only optimize your indicators to produce more accurate results but not the perfect results.
Trends are your friends when trading forex. You may also want at least one indicator to indicate the trend of the forex for you to follow. The most basic rule of trading is that you must never trade against the trend. Trading against the trending will risk you losing more easily.
Enough of explaining, let us see what are some of the most commonly used forex trading indicators around and how can it helping your trading. The Simple Moving Averages is an indicator that uses a certain period of the closing prices and does some calculated averages to produce a value. This value joins up and make up a line. This line can be use to assist in your trading sessions.
The next used forex trading indicators is Bollinger Bands. This is a very useful indicator that shows which currency is over bought or oversold. An oversold currency indicates the tendency to rise in value in any moment, while the over bought currency indicates the tendency to rise in value in any given moment. This can help the trader to catch what we call trend reverse.
The Relative Strength Index or what is called RSI, also shows the oversold or over bought status of the currency. It is usually used as a main indicator of oversold and over bought signal other than Bollinger Bands or other oversold or over bought indicator.
When using forex trading indicators, there are no one indicator that perfect. It is all about exploring and experimenting with different combinations to get the best most accurate signals to profit in the market.



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